Lawmaker: Break from Arizona sales tax would help economy

PHOENIX — Eliminating state sales tax over two upcoming holiday weekends would encourage Arizonans to make more purchases and also serve as a thank you, a state lawmaker contended.

“Last year, I was thinking of different ways to send the message to the community and to the nation that Arizona is open for business,” said Rep. Justin Pierce, R-Mesa. “To me, what this proposal does is it exemplifies a true free market where the consumer will have absolute control.”

Pierce authored HB 2384, which would establish sales tax holidays over this year’s three-day Labor Day weekend and over the 2014 July Fourth long weekend.

In addition to items subject to state sales tax, Pierce’s bill would apply to all state taxes imposed on hotel visits as well as the state use tax that applies to purchases made via the Internet, phone, mail-order catalog and more from out-of-state locations.

Pierce said the sales tax holidays would stimulate the economy by encouraging Arizonans to buy things they wouldn’t necessarily purchase. The holidays also would serve as a test case, he said.

“We’re going to look back after the fact,” he said. “How did hotels do? Did they see an increase in activity that they have not seen in years past partially because of the tax-free nature of the hotel stay?”

Arizona imposes a state sales tax of 6.6 percent on eligible retail purchases, with municipalities and counties adding taxes on top of that. Pierce said he’s considering amending the bill to apply to local taxes as well.

According to the Federation of Tax Administrators, 16 states are set to have sales tax holidays this year.

Pierce said the benefits of sales tax holidays extend beyond businesses that sell big-ticket items such as automobiles and consumer electronics.

“I believe this is a net win for every industry in Arizona,” he said. “They can use this to their advantage.”

Rep. Tom Forese, R-Chandler, chairman of the House Commerce Committee and a primary sponsor of the bill, said the benefits of sales tax holidays are self-evident to business owners.

“I think if there is any heartburn from anyone it comes from someone who doesn’t understand that a tax holiday like this will increase sales that were not going to be there before,” he said.

HB 2384 was assigned to the House Ways and Means Committee but had yet to be scheduled for a hearing.

Adam Chodorow, professor and associate dean for innovative ventures at Arizona State University’s Sandra Day O’Connor College of Law, called the idea “inefficient” because consumers would simply shift the days of their purchases.

“It’s a classic giveaway of government revenues,” he said. “Why are we thanking people for buying stuff they’re going to buy?”

But Pierce said his bill is an opportunity for Arizona to offer taxpayers some relief.

“Something like this is long overdue,” he said. “The message is that we’re ready to move this economy forward.”